<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
act of 1934 for the quarterly period ended March 31, 1996 or
( ) Transition report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from __________ to _________.
Commission file number: 0-26844
RADISYS CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 93-0945232
(State or other jurisdiction (I.R.S. Employer
of organization or incorporation) Identification Number)
15025 S.W. Koll Parkway
Beaverton, Oregon 97006
(Address of principal executive offices, including zip code)
(503) 646-1800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Number of shares of common stock outstanding as of May 6, 1996: 7,325,436
<PAGE>
RADISYS CORPORATION
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet - March 31, 1996 and
December 31, 1995 3
Consolidated Statement of Operations - Three months 4
ended March 31, 1996 and March 31, 1995
Consolidated Statement of Changes In Shareholders'
Equity - December 31, 1993 through March 31, 1996 5
Consolidated Statement of Cash Flows - Three months
ended March 31, 1996 and March 31, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
RADISYS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1996 1995
----------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20, 049 $ 10,236
Short term investments 1,000 10,922
Accounts receivable 7,275 7,008
Inventories 5,453 6,380
Other current assets 694 374
Deferred income taxes 297 297
----------- ----------
Total current assets 34,768 35,217
Equipment, net of accumulated depreciation of
$4,162 and $3,832 4,321 3,179
Other assets 786 716
----------- ----------
$ 39,875 $ 39,112
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,806 $ 1,790
Income taxes payable 299 147
Accrued wages and bonuses 682 783
Accrued warranty costs 389 334
Other accrued liabilities 266 141
Current portion of capital lease obligation 214 214
----------- ----------
Total current liabilities 3,656 3,409
Obligations under capital lease 826 884
----------- ----------
Total liabilities 4,482 4,293
----------- ----------
Commitments and contingent liabilities
Shareholders' equity
Common stock, 15,000,000 shares
authorized, 6,022,527 and 6,014,709 shares
issued and outstanding 33,633 33,627
Cumulative translation adjustment (90) (108)
Retained earnings 1,850 1,300
----------- ----------
Total shareholders' equity 35,393 34,819
----------- ----------
$ 39,875 $ 39,112
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RADISYS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
--------- --------
<S> <C> <C>
Revenues $ 11,065 $ 6,673
Cost of sales 7,398 4,219
--------- --------
Gross Profit 3,667 2,454
Research and development 1,130 698
Selling, general and administrative 1,903 1,504
--------- --------
Income from operations 634 252
Interest income, net 253 38
--------- --------
Income before income tax provision 887 290
Income tax provision 337 87
--------- --------
Net income $ 550 203
--------- --------
--------- --------
Net income per share $ 0.09 $ 0.05
--------- --------
--------- --------
Weighted average number of common and
common equivalent shares outstanding 6,162 3,928
--------- --------
--------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RADISYS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(THREE MONTHS ENDED MARCH 31, 1996 IS UNAUDITED)
<TABLE>
<CAPTION>
Preferred Stock
---------------------------------------------------------------
Series A Series B Series C Common stock
----------------- ------------------- -------------------- -------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------- ------ --------- ------ --------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993 355,556 1,500 1,820,988 4,917 2,159,504 2,973 1,372,752 322
Collection of note receivable
Exercise of common stock options 111,328 156
Issuance of common stock for cash 3,030 10
Repurchase of common stock (4,910) (13)
Net income for the year
------- ------ --------- ------ ---------- ------- --------- -------
Balances, December 31, 1994 355,556 1,500 1,820,988 4,917 2,159,504 2,973 1,482,200 475
Exercise of common stock options 58,524 106
Issuance of common stock 2,175,000 23,656
Conversion of preferred stock (355,556) (1,500) (1,820,988) (4,917) (2,159,504) (2,973) 2,298,985 9,390
Translation adjustment
Net income for the year
------- ------ --------- ------ ---------- ------- --------- -------
Balances, December 31, 1995 6,014,709 33,627
Exercise of common stock options 7,818 6
Translation adjustment
Net income for the period
------- ------ --------- ------ ---------- ------- --------- -------
Balances, March 31, 1996 -- $ -- -- $ -- -- $ -- 6,022,527 $33,633
------- ------ --------- ------ ---------- ------- --------- -------
------- ------ --------- ------ ---------- ------- --------- -------
<CAPTION>
Cumulative Retained
Notes translation (deficit)
Receivable adjustment earnings Total
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Balances, December 31, 1993 (5) (1,581) 8,126
Collection of note receivable 5 5
Exercise of common stock options 156
Issuance of common stock for cash 10
Repurchase of common stock (13)
Net income for the year 1,365 1,365
---------- ----------- --------- ---------
Balances, December 31, 1994 (216) 9,649
Exercise of common stock options 106
Issuance of common stock 23,656
Conversion of preferred stock
Translation adjustment (108) (108)
Net income for the year 1,516 1,516
---------- ----------- --------- ---------
Balances, December 31, 1995 (108) 1,300 34,819
Exercise of common stock options 6
Translation adjustment 18 18
Net income for the period 550 550
---------- ----------- --------- ---------
Balances, March 31, 1996 $ -- $ (90) $ 1,850 $ 35,393
---------- ----------- --------- ---------
---------- ----------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RADISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 550 $ 203
Adjustments to reconcile net income to net
cash provided by (used for) operating
activities:
Depreciation and amortization 330 270
Net changes in current assets and current liabilities:
(Increase) in accounts receivable (267) (953)
(Increase) decrease in inventories 927 (1,331)
(Increase) decrease in other current assets (320) 40
Increase in accounts payable 16 993
Increase (decrease) in income tax payable 152 (151)
Increase (decrease) in accrued wages and bonuses (101) (159)
Increase (decrease) in accrued warranty costs 55 35
Increase (decrease) in other accrued liabilities 125 (3)
---------- ---------
Net cash provided by (used for) operating activities 1,467 (1,056)
---------- ---------
Cash flows from investing activities:
Decrease in short term investments 9,922
Capital expenditures (1,472) (1,866)
Capitalized software production costs and increase in other assets (70) (101)
---------- ---------
Net cash provided by (used for) investing activities 8,380 (1,967)
---------- ---------
Cash flows from financing activities:
Cash proceeds from issuance of common stock, net 6 6
Proceeds from capital lease 1,272
Payments on capital lease obligation (58)
---------- ---------
Net cash provided by (used for) financing activities (52) 1,278
---------- ---------
Effect of exchange rate changes on cash 18
---------- ---------
Net decrease in cash and cash equivalents 9,813 (1,745)
Cash and cash equivalents, beginning of period 10,236 2,965
---------- ---------
Cash and cash equivalents, end of period $ 20,049 $ 1,220
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RADISYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share amounts)
(unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited and have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and in the opinion of management include
all adjustments, consisting only of normal recurring adjustments, necessary
for the fair statement of results for the interim periods. Certain
information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1995. The results of operations for interim periods are not
necessarily indicative of the results for the entire year.
Net income per share is based on the weighted average number of shares of
common stock and common stock equivalents (stock options) outstanding
during the periods, computed using the treasury stock method for stock
options.
2. ACCOUNTS RECEIVABLE
Trade accounts receivable are net of an allowance for doubtful accounts of
$227 and $233 at March 31, 1996 and December 31, 1995, respectively. The
Company's customers are concentrated in the technology industry.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Raw Materials $ 3,983 $ 3,835
Work in Process 1,252 270
Finished Goods 218 2,275
--------- ---------
$ 5,453 $ 6,380
--------- ---------
--------- ---------
</TABLE>
<PAGE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1996
---- ----
<S> <C> <C>
Land $ 1,190 $ 33
Manufacturing Equipment 3,739 3,654
Office Equipment 3,260 3,040
Leasehold Improvements 294 284
--------- ---------
8,483 7,011
Less: Accum. Depr. 4,162 3,832
--------- ---------
$ 4,321 $ 3,179
--------- ---------
--------- ---------
</TABLE>
6. SHAREHOLDERS' EQUITY
The Company granted and canceled 3,550 and 1,670 options, respectively, and
7,818 stock options were exercised during the three months ended March 31,
1996.
7. SUBSEQUENT EVENTS
On April 29, 1996, the Company purchased substantially all of the assets of
Intel Corporation ("Intel") that are dedicated to the design, manufacture
and sale of all standard and custom Multibus I and Multibus II products
(the "Acquisition"). In addition, pursuant to the terms of the
Acquisition, Intel licensed certain Intel software to the Company. The
purchase price consisted of 1,300,000 shares of the Registrant's common
stock ("Common Stock") and warrants to purchase an additional 300,000
shares of Common Stock exercisable within 24 months at prices per share
ranging from $13.50 to $15.00, plus an aggregate of $1.2 million in cash to
be paid in 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Total revenue was $11.1 million for the three months ended March 31, 1996
compared to $6.7 million for the three months ended March 31, 1995. Net
income was $550,000 for the three months ended March 31, 1996 compared to
$203,000 for the three months ended March 31, 1995.
From time to time the Company may issue forward looking statements that
involve a number of risks and uncertainties. The following are among the
factors that could cause actual results to differ materially from the
forward looking statements: business conditions and growth in the
electronics industry and general economies, both domestic and
international; uncertainty of market development; dependence on a limited
number of OEM customers; dependence on limited or sole source suppliers;
dependence on the relationship with Intel Corporation ("Intel"); dependence
on Intel's support of the embedded computer market; lower than expected
customer orders; competitive factors, including increased competition, new
product offerings by competitors and price pressures; the availability of
parts and components at reasonable prices; changes in product mix;
dependence on proprietary technology; technological difficulties and
resource constraints encountered in developing new products; and product
shipment interruptions due to manufacturing difficulties. The forward
looking statements contained in this document regarding industry trends,
product development and introductions, the acquisition of certain assets
from Intel and liquidity and future business activities should be
considered in light of these factors.
On April 29, 1996, the Company purchased substantially all of the assets of
Intel Corporation ("Intel") that are dedicated to the design, manufacture
and sale of all standard and custom Multibus I and Multibus II products
(the "Acquisition"). In addition, pursuant to the terms of the
Acquisition, Intel licensed certain Intel software to the Company.
REVENUE
Three Months Ended
------------------
(in thousands, except percentage amounts)
March 31, Percentage March 31,
1996 Change 1995
---- ------ ----
Revenue $11,065 66 $6,673
The increase in revenue for the three months ended March 31, 1996 compared
to the three months ended March 31, 1995 resulted primarily from volume
increases in OEM sales.
<PAGE>
COST OF GOODS SOLD
Three Months Ended
------------------
(in thousands, except percentage amounts)
March 31, Percentage March 31,
1996 Change 1995
---- ------ ----
Cost of Goods Sold $7,398 75 $4,219
As a Percentage of Revenue 67 63
As a percentage of revenue, total cost of goods increased for the three
months ended March 31, 1996 compared to the three months ended March 31,
1995 primarily as a result of the substantial growth in sales to OEMs,
which historically yield a lower gross margin.
RESEARCH AND DEVELOPMENT
Three Months Ended
------------------
(in thousands, except percentage amounts)
March 31, Percentage March 31,
1996 Change 1995
---- ------ ----
Research and Development $1,130 62 $ 698
As a Percentage of Revenue 10 10
The dollar increase in research and development expenses was primarily the
result of increased investment in new product development and costs of
enhancements to existing products. The Company continues to invest in new
design wins for OEM customers and the dollar increases reflect steady
increases in the number of employees working in research and development.
SELLING, GENERAL AND ADMINISTRATIVE
Three Months Ended
------------------
(in thousands, except percentage amounts)
March 31, Percentage March 31,
1996 Change 1995
---- ------ ----
Selling, General & Admin. $1,903 26 $1,504
As a Percentage of Revenue 17 23
Selling, general and administrative expenses have increased in dollar
amount in the three months ended March 31, 1996 compared to the three
months ended March 31, 1995, primarily as a result of increased personnel,
facilities and travel cost to support higher levels of sales. The decrease
as a percentage of revenues was primarily the result of operating
efficiencies achieved by spreading fixed costs over a larger revenue base,
offset partially by increases in costs required to expand international
operations.
<PAGE>
INTEREST INCOME, NET AND INCOME TAX PROVISION
Three Months Ended
------------------
(in thousands, except percentage amounts)
March 31, Percentage March 31,
1996 Change 1995
---- ------ ----
Interest Income, net $ 253 566 $ 38
Income Tax Provision $ 337 287 $ 87
Interest income, net includes interest income, interest expense, bank
charges and foreign currency transaction gains or losses. The increase in
interest income, net for the three months ended March 31, 1996 compared to
the three months ended March 31, 1995 was primarily the result of cash
invested from the Company's initial public offering in October of 1995.
The income tax provision reflect effective income tax rates of 38 percent
and 30 percent for 1996 and 1995, respectively. The increase in the income
tax provision is primarily attributable to the depletion of tax credits in
1995.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had $21 million in cash and short term
investment grade securities which represents the Company's principal source
of liquidity. The Company had working capital of approximately $31.1
million. Net cash provided by operating activities for the three months
ended March 31, 1996 was $1,467,000 as compared with net cash used by
operations of $1,056,000 for the three months ended March 31, 1995. The
increase in cash provided by operations for the first three months of 1996
was largely attributable to a decrease in inventories of $927,000.
Capital expenditures were $1.5 million in the three months ended March 31,
1996 and $1.9 million for the three months ended March 31, 1995. Capital
expenditures for the three months ended March 31, 1996 were primarily for
the purchase of two parcels of land for future expansion.
On April 29, 1996, the Company purchased substantially all of the assets of
Intel Corporation ("Intel") that are dedicated to the design, manufacture
and sale of all standard and custom Multibus I and Multibus II products
(the "Acquisition"). In addition, pursuant to the terms of the
Acquisition, Intel licensed certain Intel software to the Company. The
purchase price consisted of 1,300,000 shares of the Registrant's common
stock ("Common Stock") and warrants to purchase an additional 300,000
shares of Common Stock exercisable within 24 months at prices per share
ranging from $13.50 to $15.00, plus an aggregate of $1.2 million in cash to
be paid in 1997. The Company will fund the acquired operations from
existing cash and cash equivalents.
The Company believes that existing cash and cash equivalents, and cash from
operations will be sufficient to fund its operations for at least the next
12 months.
<PAGE>
PART II
OTHER INFORMATION
Item 6.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
On May 3, 1996, the Company filed a Form 8-K dated April 29, 1996
reporting Item 2.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RADISYS CORPORATION
/s/ Brian V. Turner
---------------------------------------------
Date: May 13, 1996 Brian V. Turner
---------------- Vice President of Finance and Chief Financial
Officer (Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
----------- ----------- ----------
27 Financial Data Schedule 15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 20,049
<SECURITIES> 1,000
<RECEIVABLES> 7,502
<ALLOWANCES> (227)
<INVENTORY> 5,453
<CURRENT-ASSETS> 34,768
<PP&E> 8,483
<DEPRECIATION> 4,162
<TOTAL-ASSETS> 39,875
<CURRENT-LIABILITIES> 3,656
<BONDS> 0
0
0
<COMMON> 33,633
<OTHER-SE> 1,760
<TOTAL-LIABILITY-AND-EQUITY> 35,393
<SALES> 11,065
<TOTAL-REVENUES> 11,065
<CGS> 7,398
<TOTAL-COSTS> 3,033
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 253
<INCOME-PRETAX> 887
<INCOME-TAX> 337
<INCOME-CONTINUING> 550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 550
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
